New VAT regulations 2010 in Europe

[bizman]

Hi,


Does anyone have any idea of how the new VAT regulations will affect a European business doing business in Europe.


So far I have been checking the net and found How VAT works - Taxation and Customs Union - European Commission


The European Comissions website don't give a clear answer on how this new VAT requirements are dealt with.


As what I know so far, every business must have a VAT number in order to send Invoices to a other business even though the other business is an oversea corporation.


Further I know that a European business will have to charge VAT regardless of the location of the company Invoiced, this also apply for overseas business - please correct me if I'm wrong.


We don't have a VAT number for our Cyprus company and therefore need to know how all this works.


I also found this link which is more useful than the above mentioned Legislation recently adopted - Taxation and Customs Union - European Commission


Finally I found a publication from Deloitte which is easier to read VAT 2010 in Europe

The changes to the VAT rules are designed to ensure that VAT on services accrues to the country where the services are used, and are part of a complex political compromise to obtain the support of Luxembourg, whose low VAT rate (15 percent) has made it a favored location for online business to consumer (B2C) service providers.

and here :

New place of supply rules for services
The new place of supply rules will make a sharp


distinction between services rendered to business clients


and those provided to private customers.


In order to allow service providers to distinguish


between these two categories, all recipients with a


VAT number are considered as business clients, even


if they also have a partial non-business activity (e.g.


public authorities). Business customers receiving services


exclusively for their own private use or the private use of


their staff will be treated as private customers. Also VAT


exempt businesses which do not charge VAT to their


clients, will be obliged to obtain a VAT registration if


they purchase services abroad.


New general rule for B2B


From 1 January 2010, new article 21 of the Belgian


VAT code will tax, as a general rule, services rendered


to business customers (B2B) at the place where the


customer is established and no longer at the place


where the supplier is established, as is currently the case.


It should be noted that services provided to both EU


and non-EU business clients will benefit from the new


B2B-rule.


Furthermore, a reverse charge mechanism will be


introduced for all services located in Belgium under


the general B2B rule (new article 51, §2, 1), obliging


customers to report the VAT due if the service provider


is not established in Belgium. Specific rules have been


devised in case the foreign service provider also has


an establishment in Belgium: the reverse charge only


applies if that establishment does not intervene in the


service, if it does, the provider should charge Belgian


VAT on their invoice.


A restricted list of clearly defined exceptions to this rule


will exist, most of them applicable in 2010 as well.


New general rule for B2C


Services provided to non business clients (B2C) will


continue to be located where the service provider is


established or have their establishment from where the


services are provided (new article 21bis of the Belgian


VAT code).


Apart from the services that receive particular VAT


treatment in B2B and B2C, there will be many more


exceptions to the rule in a B2C context. Overall this


results in a situation whereby after 2010 services


provided to non business customers will continue to


be taxed in the same way as before. This means that


services to non EU residents will largely continue to be


exempt from paying tax in the EU. A major change


will be made to cross border services to non business


customers within the EU as of 2015, when a range


of electronic and similar services will be taxed in the


country of the customer.


For ease of understanding, the current and future rules,


the most important changes are sumarized in the tabel


on the next pages.

source: Legislation recently adopted - Taxation and Customs Union - European Commission

 

[SysOp]

I'm not sure about this will have to ask the tax department but so far it has been the case that you not charged the buying European company for VAT, if one did so and the company paid the VAT Invoiced it wasn't a big issue since one could just walk to the local VAT office and withdraw the VAT.


Recently those regulations have been changed, but in general the basic requriements still apply, only thing as I know is that now you HAVE to charge the VAT regardless the other businesses location, the company who was Invoiced VAT then need to get a VAT return from the local tax authority. Further as I remember, the reason for the changes are to avoid fraud with the VAT.

 

[bizman]

I was wondering if you could legally avoid the tax if you bind up your entire business on a offshore structure which has a foundation for instant in Panama or the Seychelles parmount? Have been studieng all the different websites on google which pop up on tax savings and asset protection, found lots of stuff there...

 

[Spinat]

So I assume we all have to move offshore, means find a payment processor which accept companies outside of Europe and can transfer the money to an offshore/onshore bank account...

 

[SysOp]

You will have to charge VAT now, regardless where the company is located as long as you are an European business.... thats the long arm of the European comission and all it's member countries.


See also the 2010 report here VAT 2010 in Europe

 

[lentak]

Hi,


I'm new here and want to say that it is surely better to open a business out of EU. These VAT regulations are EU businesses killer.

 

[JohnLocke]

Welcome aboard lentak, please elaborate on the statement :

These VAT regulations are EU businesses killer.

I do not understand why you find it to be a business killer, if you know how things work within the EU it can be a advantage rather than a disadvantage

 

[lentak]

Welcome aboard lentak, please elaborate on the statement : I do not understand why you find it to be a business killer, if you know how things work within the EU it can be a advantage rather than a disadvantage

Why? Well...I'm selling online services to EU and also out of EU. If I sell service to EU business it's ok, I don't have to be registered for VAT (but customer has to be as he pays VAT at his country), if I sell service out of EU I have to register for VAT. Being registered for VAT is disadvantage for me - BIG TIME CONSUMING, higher prices, additional software etc... If I have a customer in other EU country who is not registered for VAT he cannot order service from me, otherwise he would need to register for VAT. Therefore it is better for him to buy services from a local company. With this I just lost a client.


This limiting me to sell services to non-VAT registered businesses and force me to be VAT registered if I sell out of EU. Correct me if I'm wrong.

 

[JohnLocke]

True, if you primary sell to consumers, private people it may be a fact that your pricing can be way more competive if you can avoid the VAT (which is possible if you are selling from a company outside of the EU ie Seychelles, Belize, BVI, Panama etc.) however, if your primary customer base is EUR companies you will want to have a EU company for the trading this is of all parties involved interest in you can elimintae the VAT. Further don't forget that if you have an EU company you can also get the VAT on purchases back so you may be able to buy equipment and furnitures etc. way cheaper!

 

[bizman]

Never charged VAT for my online sales, never faced any troubles all good

 

[EliasIT]

Did this all actually came into force?

 

[bizman]

Well! If you ask yes it came into force! If you ask if all are following the rules, the answer is no it never worked as intended